The risks of crypto-assets from a financial crime, money laundering and terrorist financing perspective
The risks of crypto-assets from a financial crime, money laundering and terrorist financing perspective

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • The risks of crypto-assets from a financial crime, money laundering and terrorist financing perspective
  • What are crypto-assets?
  • Criminal exploitation of crypto-assets
  • Criminal cases involving crypto-assets
  • Regulators, financial crime and crypto-assets
  • EU and UK anti-money laundering requirements
  • Conclusion

What are crypto-assets?

One of the hurdles in relation to understanding non-traditional currencies and assets lies in the inconsistent use of language. Regulators and tax authorities, as well as commentators, refer variously to digital currencies, virtual currencies, cryptocurrencies, crypto-assets and crypto tokens, and it is not always clear whether they are using the terms interchangeably or with the specific meaning of each in mind. For more information about how these terms are defined, see Practice Note crypto-assets—essentials.

This Practice Note examines the risks of crypto-assets from a financial crime, money laundering and terrorist financing perspective. It considers why crypto-assets are susceptible to, and can facilitate, crime and how regulators have responded to these perceived threats. It also discusses recent criminal cases involving crypto-assets, in particular Bitcoin.

Criminal exploitation of crypto-assets

Criminal usage of Bitcoin and other crypto-assets has attracted the attention of financial regulators, legislators, the media and the public. The focus has been on how pseudonymous and decentralised virtual currencies—and the consequent difficulty of tracing payments—may contribute to criminal activity such as cybercrime, money laundering and terrorist financing.

Nature of crypto-assets

Crypto-assets are digital assets in which encryption techniques are used to regulate the generation of units of the assets in question and verify the transfer of assets. Crypto-assets are often (but not always) decentralised, meaning that they are